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Alberto Abaterusso
Alberto Abaterusso
Articles (1923) 

A Word of Caution for 2 Underperforming Stocks

These stocks have vastly underperformed the US market averages

December 10, 2019 | About:

GrainCorp Limited (GRCLF) and Mallinckrodt plc (NYSE:MNK) have failed their shareholders’ expectations as they have underperformed the S&P 500 index over the past several years. The index is the benchmark for US-listed stocks. These stocks have either not paid any dividend over the observed periods or paid a scanty one. Analysts on Wall Street have issued a moderate sell recommendation for them.

GrainCorp

Shares of GrainCorp Limited have tumbled 18.3% so far this year, 20% over the last year and 20% and 20% over the last five years through Dec. 9. The company has underperformed the S&P 500 by 43.3%, 39% and 72%, respectively.

GrainCorp Limited paid a small semi-annual dividend of 8 Australian cents(about 5.5 cents in USD) per common share to its shareholders on Dec. 13, 2018, generating a trailing 12-month dividend yield of 1.11% versus the S&P 500’s yield of 1.82%. The company has not yet paid the semi-annual dividend for the first part of 2019.

This Australian global food ingredients and agribusiness company closed at $5.19 AUD per share on Monday for a market capitalization of $1.2 billion AUD.

The stock has a price-book ratio of 0.95 versus the industry median of 1.38 and a price-sales ratio of 0.35 compared to the industry median of 0.88. Following the sharp decline in the share price, the stock does look cheap, though it is still far from oversold levels as the 14-day relative strength index is only 43.

GuruFocus assigned a moderate 5 out of 10 rating for the company's financial strength and for its profitability. Analysts issued a moderate sell recommendation rating for GrainCorp shares.

Mallinckrodt

Shares of Mallinckrodt plc have dropped 79.2% year to date, 84.3% over the past year and 96.6% over the past five years through Dec. 9. They have underperformed the S&P 500 Index by 104.2%, 103.3% and 148.6%, respectively.

The stock does not pay a dividend.

Shares of the English developer and manufacturer of specialty pharmaceutical products closed at $3.28 on Monday for a market capitalization of $275.83 million.

The stock has a price-book ratio of 0.1 versus the industry median of 1.88 and a price-sales ratio of 0.1 compared to the industry median of 2.4. The share price doesn’t seem expensive because it has lost a lot over the past several years. Regardless of heavy downturn, the stock is still far from oversold levels as the 14-day relative strength index is 50.

GuruFocus issued a low rating of 3 out of 10 for the company's financial strength, but a positive rating of 6 out of 10 for its profitability. The stock has a moderate sell recommendation rating from Wall Street. Analysts issued an average target price of $1, reflecting a 69.5% downside from Monday’s closing share price.

Disclosure: I have no positions in any securities mentioned.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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